Daily Management Review

Reasons for China Building a New Silk Road through Singapore


08/22/2016




Reasons for China Building a New Silk Road through Singapore
Teo Siong Seng sees his life as one immersed in the ancient trading networks of Asia gained from his experiences of being the son of a man who journeyed from China to Singapore and founded a shipping business a half century ago.
 
Hence as China rejuvenates its Silk Road routes to the Middle East and Europe, the managing director of the Pacific International Lines Group is seeking to benefit. To help China’s largest shipping group build connections in Southeast Asia and beyond, he is setting up a joint venture with China Cosco Shipping Corporation Ltd.
 
“Chinese companies alone may not have enough experience to carry out their investments in other countries. To cooperate with companies like us would also make their businesses smoother. They have to learn the way we deal with local people and the way we do business,” said Teo, who’s also chairman of the Singapore Business Federation.
 
As President Xi Jinping seeks to export excess industrial capacity while building influence overseas, this venture underscores Singapore’s potential as a gateway to Southeast. The number of Chinese companies registered locally has almost doubled in the past five years to more than 7,500 s they were lured by shared cultural bonds and the former British colony’s legal and financial systems.
 
Local politics has been complicated by tensions over China’s territorial claims in the South China Sea and therefore exploiting Singapore’s regional familiarity could help Chinese companies navigate such local political issues.
 
“From all the failures, Chinese have learned that they need a local broker. Chinese companies believe Singapore companies are easier to deal with and they know how to deal with different markets,” said Gao Zhikai, a board member of coking coal distributor Winsway Enterprises Holdings and former vice president of crude oil giant CNOOC Ltd.
 
For the maritime portion of his revitalized Silk Road, vasts amounts of money to Southeast Asia for infrastructure projects are being offered by Xi. The project is known as “One Belt, One Road”, combined with an overland route through Eurasia.
 
A solution to the industrial overcapacity that has built up in many sectors can also be provided to Beijing by this project. Xi’s push to make China a regional power and challenge decades of U.S. dominance in Asia is also made possible by this economic carrot. Concerns over the country’s military expansion and its territorial ambitions could be blunted by greater trade and investment.
 
Last year, its Southeast Asian headquarters in Singapore was set up by investment company Fosun International -- one of the largest private groups in China. “Chinese companies have to pick the right platform and springboard before making an international move, and Singapore is a very good choice,” said chief executive officer Liang Xinjun.
 
History and the region’s trading culture forms the base for China’s relations with Southeast Asia. While ethnic Chinese traders had been plying routes in the area for centuries before, during the second Sino-Japanese War in the 1930s, some Chinese Singaporeans, like Teo’s father, migrated from Chinese provinces like Fujian.
 
"Many countries in Southeast Asia are becoming more cautious when dealing with Chinese companies, which have a relatively bad track record in implementing deals over the past decade," said Winsway’s Gao, who is also director of the China National Association of International Studies.

"Given the growing tensions over the South China Sea, Chinese firms have to be even more careful in putting the deals in practice,” Gao said. “Even a small mistake could cause a major negative reaction,” Gao said.
 
To invest in industrial and technology parks in Asia, a joint venture with China Machinery Engineering Corporation was formed by Singapore’s Ascendas-Singbridge Group last year. The venture expects to announce its first project within six months, said Ascendas-Singbridge Chief Customer Solutions Officer Aylwin Tan.
 
“We find that trust is the most important element in the Chinese business culture. Singaporeans can better appreciate the Chinese culture, and understand the spoken and unspoken rules of doing business in China,” Tan said.
 
(Source:www.bloomberg.com) 






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